The Advantages and Disadvantages of Debt Consolidation Loans
There are many ways in which you can use debt consolidation loans to minimise the amount of money that you need to lay out every month to pay back your debt. You can call all your creditors and find out if they will offer you a lower interest rate and if they will work out a lower monthly repayment schedule. They can do this either by re-negotiating your original loan agreement or by lengthening the repayment period. With this information in hand you can choose the creditor that offers the lowest interest rate and is the most willing to negotiate the terms of your credit agreement. Call this creditor and find out if they will ‘buy’ your debt from your other creditors.
Basically this means that they will settle your debt with your creditors and you will then owe them the sum that you previously owed to the other creditors. They will probably also try to reach a deal with these creditors for a lower settlement amount on your behalf. You will then enter into a new credit agreement for terms and conditions of the repayment of the entire sum. The new contract will state the period over which you must repay the money as well as the lower interest rate. There can however be disadvantages to debt consolidation loans.
Make sure that you will not end up paying much more for your debt if the period of repayment has been extended. Interest on loans accumulates and the longer the repayment period, the more interest you will end up paying. Also find out if there are any hidden costs or fees attached to the consolidation agreement. You should ensure that you will be able to afford the new monthly repayments and budget carefully.
To find out how a credit counsellor can assist you with debt consolidation loans and minimise the risk of you paying more for your debt, simply contact us.